Upstart Helio Seen as ‘Glimmer of Hope’ in Tough Sector

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Young consumers want cell phones that not only make calls, but also provide Internet access and let them play videos, music and games.


But as proven by the bankruptcy filings of Walt Disney Co.’s Mobile ESPN and, more recently, L.A.-based Amp’d Mobile Inc., it’s not easy making a connection.


“There’s a lot of consumer demand for these services, but it’s turning out to be a tough space to play in,” said analyst Andy DeGaravilla of Compete Inc., which surveys 2 million online consumers about topics such as telecommunications and media. Upstart L.A. mobile carrier Helio LLC, however, is a “glimmer of hope” for the industry, he said.


Most mobile virtual network operators lease their coverage networks, and usually target a young, high-tech demographic segment. About 17.5 million subscribers are shared between six major providers, which include Virgin Mobile USA, Helio, and Amp’d Mobile.


Unlike most of its competitors, Helio isn’t a reseller that slaps its brand name on an off-the-shelf device. It produces its own handsets, the newest of which is Helio Ocean, with a sliding mechanism that allows it to function like a standard phone and a keyboard-based e-mail and Web device.


In fact, Helio doesn’t categorize itself as a mobile virtual network operator, said Courtney Carlisle, the company’s public relations manager. Most industry observers do, however, because it piggybacks on Sprint Inc. as its network provider.


Craig Shapiro, head of content strategy and acquisition, says that’s fair.


“But we have a knee-jerk reaction to being lumped into the category because no other MVNO creates its own devices and controls terminal engineering, platforms, and all the nuts and bolts of the service,” Shapiro said.


Helio, a joint venture of Earthlink Inc. and SK Telecom, South Korea’s largest mobile phone carrier, launched last year and garnered 70,000 subscribers within its first six months of marketing.


Helio’s phones come equipped with Google Map and a GPS-based location service called Buddy Beacon that enables friends and family who are Helio subscribers to be located wherever they are. The company was also the first to roll out MySpace on a mobile device.


Its pricing is $145 a month for a comprehensive plan that includes unlimited calls, texts and access to its media content; or an & #341; la carte plan starting at $40 a month.



Content averse


What Helio doesn’t do is produce content.


“We’re not a media company,” Shapiro said. “We’re focused on platform and technology. We’re working together with the creative community as opposed to trying to be a competitor.”


That’s not the case for most of the mobile virtual network providers. Amp’d Mobile, for example, seeks to be a media company, producing content from an in-house studio. Its popular “Lil’ Bush” series, a comical animation on the president’s childhood, has been licensed by Comedy Central. Amp’d filed Chapter 11 bankruptcy this month citing $100 million in debt to investors and partners.


While Amp’d said in a news release that it is “confident we will emerge from this stronger than ever,” analysts and industry insiders are not as optimistic. Bill Stone, president of Amp’d Mobile, did not show up last week as a scheduled panel speaker at Digital Hollywood, a conference in Santa Monica, where the panel moderator held up his name placard and asked the audience to “observe a moment of silence” for the company.


The company did not return inquiries seeking comment.


Analysts said Amp’d Mobile made a big mistake by hanging its hat on streaming video, when a vast majority of cell phone users do not watch video or listen to music on their phone. Bloggers also complained that the company has failed to deliver on the basics, such as accurate phone bills and timely delivery of handsets.


And unlike Helio, Amp’d is not backed by “big parents” in different businesses who don’t rely on the company as a sole source of income. “Amp’d is Amp’d,” said David Chamberlain, analyst at In-Stat. “They are an independent company, like a runt of a kid showing up at a football field to play with all the big guys.”


Mobile ESPN, backed by cable channel ESPN, gave up too soon, Chamberlain said, when it closed a few months after it launched a wireless service targeted at sports fans.



Korean connection


Comparable to its competitors, Helio also targets young adults between ages 18 to 34, but also relies on a lucrative affinity group with a service targeted at Koreans living in the United States. Called Helio SKT, the phone comes equipped with Korean key pads, discounted calls to Korea and Korean karaoke. “That’s a fairly big, stable market and a ready-made audience,” Chamberlain said.


Helio SKT members send about 22,500 text messages to Korea per day, according to Helio.


DeGaravilla, the Compete Inc. analyst, said Helio has a huge advantage being linked to a telecom giant in tech savvy South Korea.


Helio Ocean, the company’s smart phone, itself is the best differentiator, he said.


“It’s a cool phone with innovative design exclusive to Helio and they’ve integrated their services and software really well with the phone,” DeGaravilla said. “Having access to SK Telecom’s research and development strengths is a definite plus.”

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